Jan. 26 (Bloomberg) -- U.S. House lawmakers approved six
bills to limit the reach of Dodd-Frank Act derivatives rules,
including measures to define which firms are swap dealers,
subjecting them to higher capital and margin requirements.

The House Agriculture Committee voted unanimously yesterday
for two bills to limit the Commodity Futures Trading
Commission’s definition of which firms can be designated as
dealers, and two measures to limit application of margin on
certain firms and bar regulators from dictating how many traders
would have to compete in swap transactions.

The latter two bills, which would amend the 2010 regulatory
law, were approved in November by the Financial Services
Committee, which shares jurisdiction over the $708 trillion
global over-the-counter swaps market.

The measures approved yesterday, stemming from Republican
efforts to limit the reach of the CFTC rules, have little chance
of winning congressional approval, said Representative Collin
Peterson of Minnesota, the Agriculture Committee’s top Democrat.

Representative Randy Hultgren, an Illinois Republican,
sponsored a measure to exempt from the swap-dealer designation
institutions with outstanding swaps of less than $3 billion, as
well as non-financial firms that use them to hedge or mitigate
commercial risk. The panel adopted an amendment clarifying that
the exemptions don’t apply to financial firms.

A second measure on the swap-dealer definition would exempt
banks and farm credit lenders that can show their swaps activity
allows them to increase lending.

The committee also approved by voice vote legislation to
bar regulators from imposing margin requirements on commercial
and manufacturing end-users of derivatives. The Coalition for
Derivatives End-Users, which includes brewer MillerCoors LLC,
has lobbied Congress and regulators to exempt end-users from
collateral requirements.

The panel followed the House Financial Services Committee
in unanimously approving a measure exempting swaps between
subsidiaries of the same company from Dodd-Frank clearing and
trading regulations.

For more, click here.

Compliance Action

Einhorn, Greenlight Fined $11 Million in U.K. for Punch Sale

David Einhorn and Greenlight Capital Inc. were fined 7.2
million pounds ($11.2 million) by the U.K.’s financial regulator
for trading on inside information in Punch Taverns Plc in 2009.

Einhorn, Greenlight’s 43-year-old chairman, was told of
Punch Taverns’s plan to sell equity by a broker representing the
company, the Financial Services Authority said in an e-mailed
statement yesterday. He then sold more than 11 million Punch
Tavern shares over the following four days, avoiding losses of
about 5.8 million pounds for the fund, the regulator said.

Greenlight said the market abuse was “inadvertent” and
the regulator agreed it wasn’t deliberate or reckless. The fine
won’t come out of Greenlight funds, the New York-based firm said
in a statement.

The FSA is imposing stricter supervision after being
criticized for failing to prevent the U.K.’s worst financial
crisis since the World War II. The fine against Einhorn, 3.64
million pounds, is the second-largest civil penalty levied
against an individual by the FSA.

“We believe that this action is unjust and inconsistent
with the law and with prior FSA enforcement,” Einhorn said in
the Greenlight statement. “However, rather than continue an
arduous fight, we have decided to put this matter behind us.”

An outside spokeswoman for Punch declined to comment on the
FSA fine and refused to provide her name citing company policy.

For more, click here.

Lima Stock Exchange Suspends Intercapital SAB Brokerage

The Lima Stock Exchange said it suspended brokerage
Intercapital SAB from trading for lack of funds.

Lima-based Intercapital will have 90 days to show increased
capital, the exchange said yesterday in a statement posted on
its website.

Former Bank Indonesia Deputy Governor Named Suspect, Agency Says

A former Bank Indonesia deputy governor, identified under
the initials MSG, has been named a suspect in the alleged
bribery of lawmakers in the appointment of then deputy governor
Miranda Goeltom, Johan Budi, a spokesman at the Indonesian anti-corruption agency, said, confirming a report by Metro TV today.

The government has issued a travel ban on the suspect, Budi
said.

Courts

Stanford Told ‘Lie After Lie’ to Investors, U.S. Prosecutor Says

R. Allen Stanford engaged in a long-term fraud scheme and
lied repeatedly to investors to “live the life of a
billionaire,” a U.S. prosecutor told jurors as the financier’s
criminal trial started in Houston.

Stanford, 61, was the ringleader of a $7 billion investment
fraud, the U.S. said in a 14-count indictment accusing him of
mail fraud and wire fraud, crimes that carry maximum sentences
of 20 years in prison. He’s also charged with conspiracy to
commit mail fraud and wire fraud and to obstruct a U.S.
Securities and Exchange Commission probe.

“I plead not guilty to every count,” Stanford, wearing a
light gray plaid suit and a white dress shirt and no necktie,
told the jury yesterday.

Stanford has been in federal custody since being indicted
in June 2009. His trial was postponed three times because of
changes to his legal defense team, the after-effects of a
jailhouse beating and a subsequent prescription-drug addiction.

In Washington yesterday, the SEC urged a judge to order the
federal Securities Investor Protection Corp. to create a claims
process for Stanford’s alleged victims.

Stanford stole from investors “so that he could live the
lifestyle of a billionaire,” Assistant U.S. Attorney Gregg
Costa said in his opening statement in the Houston courtroom.
“He told them lie after lie after lie.”

Scardino and defense lawyer Ali Fazel have previously said
they will use the records of Houston-based Stanford Group Co.
and Antigua-based Stanford International Bank Ltd. to prove
their client never intended to defraud anyone.

No investor lost money until the SEC sued Stanford and
obtained a court order to take control of his businesses in
February 2009, the defense has said.

“Mr. Stanford’s financial empire was real and did make a
lot of money and did pay every penny of what was owed to
depositors for 22 years,” Robert Scardino, one of Stanford’s
court-appointed lawyers, told the jury in his own opening
remarks.

The trial may last about six weeks, U.S. District Judge
David Hittner said.

The criminal case is U.S. v. Stanford, 09-cr-00342, U.S.
District Court, Southern District of Texas (Houston). The civil
case against Stanford is Securities and Exchange Commission v.
Stanford International Bank Ltd., 09-cv-00298, U.S. District
Court, Northern District of Texas (Dallas). The SIPC case is
Securities and Exchange Commission v. Securities Investor
Protection Corp., 11-mc-00678, U.S. District Court, District of
Columbia (Washington).

SEC Says Rakoff Erred on ‘Public Interest’ Test for Accords

U.S. Securities and Exchange Commission lawyers said U.S.
District Judge Jed Rakoff erred in determining that courts must
find its proposed settlements with companies to be “in the
public interest” to win approval.

Courts must only find the accords to be “fair, adequate
and reasonable,” SEC attorney Andrea Wood told a federal judge
in Wisconsin in a filing defending the agency’s proposed
settlement with Milwaukee-based Koss Corp., a manufacturer of
stereo headphones sued for allegedly making materially
inaccurate financial statements for fiscal years 2005 through
2009.

In November, Rakoff in Manhattan rejected Citigroup Inc.’s
$285 million settlement with the SEC over claims the bank misled
investors in collateralized debt obligations. He had criticized
the SEC’s practice of letting financial institutions such as New
York-based Citigroup settle without admitting or denying
liability.

In the proposed Koss settlement, Koss and its chief
executive officer didn’t admit or deny the SEC’s claims.

U.S. District Judge Rudolph T. Randa in Milwaukee had
questioned the adequacy of the SEC-Koss settlement’s provision.

The case is SEC v. Koss, 11-991, U.S. District Court,
Eastern District of Wisconsin (Milwaukee).

For more, click here.

MF Global Clients May Lose in $700 Million Bankruptcy Fight

MF Global Holding Ltd.’s clients may be the losers no
matter who wins a $700 million dispute between bankruptcy
administrators in London and New York that threatens the return
of money locked in customer accounts.

The trustee of MF Global Inc., the New York brokerage unit,
is seeking the return of money used as margin for American
customers trading in Europe. It wants U.K. administrators KPMG
LLP to tap into $1.2 billion it had set aside for customers with
segregated accounts, which are supposed to be protected.

If successful, the trustee’s claim would significantly
reduce KPMG’s client money pool and lower returns for U.K.
customers, said two people with knowledge of the discussions who
declined to be identified because they are confidential. Should
KPMG win, U.S. customers will be treated as unsecured creditors
and face a lengthy wait for any payout.

MF Global filed the fifth-largest bankruptcy for a
financial company Oct. 31 after placing losing bets on European
debt.

A dispute over client money held by Lehman Brothers
International Europe is still being fought out in U.K. courts
more than three years after the bank collapsed.

KPMG was appointed special administrator of MF Global’s
U.K. unit on Oct. 31. While KPMG has found all the money in
protected accounts, MF Global Inc.’s claim is the first serious
threat to the return of customer funds in the U.K.

“We are aware of the trustee’s claim on the client money
pool,” KPMG administrator Richard Heis said in a statement.
“We do not agree with it but will continue to work
constructively with his team to bring about an early resolution
of the matter.”

In the U.S. bankruptcy, trustees said as much as $1.2
billion is missing from segregated accounts. Jon S. Corzine, MF
Global’s former chief executive officer, has apologized to
customers and employees affected by the collapse.

KPMG was forced to set aside funds pending the resolution
of the dispute, which means it can’t return the majority of
money it has recovered to customers, people with knowledge of
the matter said. It wants the $700 million to be treated as an
unsecured claim, which would be paid after clients get
reimbursed from the customer money pool.

“The Trustee strongly believes these funds were segregated
for U.S. customers who traded on foreign exchanges and, thus,
should be returned to those customers,” Kent Jarrell, a
spokesman for trustee James Gidden said. Giddens has hired law
firm Slaughter and May to handle the dispute, according to New
York court documents.

The brokerage case is: Securities Investor Protection Corp.
v. MF Global Inc., 11-02790, U.S. District Court, Southern
District of New York (Manhattan). The parent company’s
bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

Interviews/Speeches

Deutsche Bank’s Jain Says Investment Banks Face Mergers

Deutsche Bank AG’s Anshu Jain, who is taking over as co-chief executive officer at the end of May, talks about the
outlook for consolidation among investment banks and the threat
of regulation.

He speaks with Erik Schatzker on Bloomberg Television’s
“The Pulse” at the World Economic Forum’s annual meeting in
Davos, Switzerland.

For the video, click here.

Morgan Stanley’s James Gorman Comments on Regulation at Davos

James Gorman, chairman and chief executive officer of
Morgan Stanley, talked about global market conditions, the
European sovereign-debt crisis and financial regulation. In
particular, he discussed capital rules, the Dodd-Frank
legislation and the Volcker Rule.

Gorman, who spoke with Bloomberg’s Erik Schatzker at the
World Economic Forum’s annual meeting in Davos, Switzerland,
also discussed Morgan Stanley’s compensation measures. They
spoke on Bloomberg Television’s “InBusiness With Margaret
Brennan.”

For the video, click here, and for more, click here.

Merkel Makes Davos Appeal for Time to Solve Debt Crisis

German Chancellor Angela Merkel spoke about the European
sovereign-debt crisis, the size of the region’s rescue fund and
its relationship with the U.S.

She spoke at the World Economic Forum’s annual meeting in
Davos, Switzerland.

For the video, click here.

Separately, Merkel said in an interview with European
newspapers yesterday that joint euro-area debt is possible only
if Europe becomes more like one country and warned that Germany
won’t “promise ever more money” to stem the debt crisis.

Merkel said it’s too early to call the all-clear on the
crisis and that Greece is a “special case” where efforts by
international officials and the Greek government “haven’t
succeeded in stabilizing the situation.” She defended her
agenda of debt cuts and austerity to save the euro and renewed
her opposition to “expensive” economic stimulus programs,
while saying Germany is already showing “solidarity” by
backing Europe’s rescue funds.

For more, click here, and click here.

Comings and Goings

Fortress Says CEO Daniel Mudd Resigns After SEC Lawsuit

Fortress Investment Group LLC said Daniel Mudd resigned as
chief executive officer and a director of the New York-based
hedge fund and private-equity firm after a leave of absence to
respond to a government lawsuit.

Mudd said yesterday in a statement that he did not want the
“uncertainty associated with a leave of absence” to become a
distraction for the company or its investors.

Randal Nardone, Fortress principal and co-founder, will
continue to serve as interim CEO, according to the statement.

Mudd, formerly CEO of Fannie Mae, took a leave from
Fortress on Dec. 21 to respond to allegations by the Securities
and Exchange Commission. He and former Freddie Mac CEO Richard
Syron were sued for allegedly understating by hundreds of
billions of dollars the subprime loans held by the government-owned mortgage finance companies. Mudd denied the claim, saying
the U.S. government and investors were aware of “every piece of
material data about loans held by Fannie Mae.”

Tom Green, Syron’s attorney at Sidley Austin LLP in
Washington, said in December there was “no uniform definition”
of subprime in 2007 and that Freddie Mac included in its
disclosure tables information detailing credit risks.

Baer Said Under Review to Become New U.S. Antitrust Chief

William Baer, whose law firm championed AT&T Inc.’s failed
bid to acquire T-Mobile USA Inc., is the top candidate to head
the U.S. Justice Department’s antitrust division, two people
familiar with the situation said.

Baer, 61, who leads the antitrust group at Arnold & Porter
LLP in Washington, is the subject of a background investigation
for job by the Federal Bureau of Investigation, said the people,
who spoke on condition of anonymity because the process is
confidential.

The White House is vetting Baer for the post after Sharis
Pozen, acting chief of the Justice Department’s antitrust
division, said Jan. 23 she will leave her position on April 30.

Baer and Gina Talamona, a Justice Department spokeswoman,
declined to comment on the potential nomination in separate e-mails.